Peso weakens after BSP, Fed rates decisions
By Karl Angelo N. Vidal, Reporter
The peso weakened against the dollar on Thursday, March 22, as the market expects the Bangko Sentral ng Pilipinas (BSP) to keep its policy rates steady.
The local currency ended Thursday’s session at P52.20 against the greenback, five centavos lower than the P52.15-per-dollar finish on Wednesday.
The peso opened flat at P52.15 versus the greenback, while its intraday high was at P52.05. Its worst showing, meanwhile, stood at its P52.20-per-dollar close.
Dollars traded spiked to $717.4 million from the $445.6 million recorded during the previous trading.
“We saw very strong dollar versus the peso because the expectation for the [BSP’s Monetary Board] was no rate hike,” a trader said in a phone interview on Thursday.
After the trading, the BSP kept its policy rates unchanged, citing firm domestic economic activity and within-target inflation.
Meanwhile, Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, also attributed the weaker performance of the peso to the interest rate hike from the US Federal Reserve (Fed).
“Dollar-peso experienced a downward pressure today from the Fed rate hike,” Mr. Asuncion said in a text message.
On early Thursday (Manila time), the Fed decided to hike their interest rates during their two-day monetary policy meeting, in line with market expectations. This puts the new benchmark overnight lending rate from 1.5% to 1.75%.
This was the sixth rate hike from the Fed from the near-zero or 0.25% rate in 2015.
The US central bank also forecast at least two more hikes this year, signaling confidence in the stronger economy which could lead to further tightening, according to a report from Reuters.
